We provide the first subnational-level examination of the relationship between the presence of policies and institutions that are consistent with economic freedom and trade volume. To do so, we create a new comprehensive dataset detailing export activity between each U.S. state (that is, for the volume of trade between Texas and Oklahoma, Texas and New Mexico, etc.) and between each U.S. state and each Mexican state (Texas and Chihuahua, Texas and Coahuila, etc.). Our empirical strategy allows us to explore what effect institutions have on both interstate trade and cross-border trade, and also what impact the national border has on these trade relationships. Additionally, we examine the relationship between trade volume and economic prosperity. Most previous work in this area utilizes country-level data. Because individual states differ, understanding subnational trade flows can help us gain a clearer picture of both the determinants and consequences of trade between the nations. By utilizing state-level data, we are in the unique position of being able to understand both subnational relationships and the micro-determinants of national relationships.
regional trade, interstate trade, border effects, gravity model, economic freedom, institutions, trade barriers
Growth and Development | Labor Economics | Regional Economics
Mission Foods Texas-Mexico Center
Stansel, Dean and Tuszynski, Meg Patrick, "Institutions, Trade, and Economic Prosperity: An Examination of the U.S. and Mexican States" (2019). Mission Foods Texas-Mexico Center Research. 4.